Transportation Funding: We Need Some New Ideas

By Commissioner Charlie Zelle

The summer road construction season is long gone, and we’re now working on keeping streets clear through the snow and ice season. These are two of the most significant transportation services that local and state governments provide to Minnesota citizens. And every year, government officials strategize on how best to spend the precious tax revenue that has been set aside to meet transportation needs.

As we enter the 2014 legislative session, we’ll also be looking for innovative ideas for new sources of transportation funding.

There are more than 140,000 miles of roads in Minnesota, owned by one government or another. And roads are only part of the picture. The state’s transportation system is an interconnected web of transportation assets that allow all of us to get from A to B safely and efficiently.

This system was years in the making and costs billions of dollars. And continuing to provide the services our citizens and businesses need has a cost as well. How government funds the transportation system is an ongoing challenge.

Importance of transportation systems As the commissioner of the Minnesota Department of Transportation, or MnDOT, I’ve been traveling across the state having conversations with citizens and community leaders. One message that rings clear everywhere: transportation assets are vital to all communities, to their businesses, and their citizens.

When I speak with business leaders, we discuss logistics. Getting their raw materials in and finished products out to market is their top priority. Knowing their employees will be able to get to work is vital. And, when it snows, they need to know their operations will continue with as little interruption from snow-covered roads as possible.

Local residents often chime in with concerns for safe walking and biking trails. The state currently has more than 3,000 miles of paved and unpaved bicycle trails. The City of Minneapolis alone has 92 miles of on-street bikeways and more than 85 miles of off-street bikeways.

We know that cities and counties build and maintain many of these recreational trails. And we know that residents enjoy them. Access to these paths has a great bearing on how residents perceive the quality of their lives.

Current funding When the talk turns to the next 20 years, community leaders express concern. They know costs are increasing, transportation assets are in need of repair, and government is having a hard time keeping up with work necessary to keep the system working well.

Funding at the state level comes from a number of sources, including fuel taxes, motor vehicle sales taxes, and license tab fees. The agency also receives federal funding. All of that is plugged into a formula in the highway trunk fund.

About 33 percent of what MnDOT takes in is distributed to local governments through state aid. Another 35 percent goes to our highway and bridge construction program. And about 10 percent goes into operations and maintenance. The rest is divided among public safety, multimodal systems, debt service, and general support.

_______________________________ The new Highway 61 Hastings Bridge opened last June.Photo by Nick Egger _______________________________

At the city and county levels, the revenue stream is smaller, driven primarily by property taxes. In recent legislative sessions, counties have been given a wheelage tax option to help fund transportation. It allowed counties to levy a $5 tax for each vehicle that is kept in the county. Five Twin Cities metro counties have taken advantage of the tax. On Jan. 1, another 42 counties began using the tax, which increased to $10 per vehicle. The Association of Minnesota Counties estimates counties will take in more than $33 million for transportation purposes.

To supplement the funding of city streets, the League of Minnesota Cities is seeking legislative approval for street improvement districts. The approach, which allows a city to designate an area as a street improvement district and then distribute the cost among property owners in that district, would give cities more flexibility to finance larger construction and maintenance work. (See “New Funding Source for City Streets”)

Funds for the future MnDOT’s most current look into the future is in the Minnesota state highway investment plan. The current 20-year plan is fiscally constrained in approach. We plan to spend only the revenue that is projected. We know that in the first 10 years, we should be able to stay even with maintenance and add some enhancement. In the second 10 years, our focus will primarily be on maintaining what we have.

Recent research tells us that transportation investments have a high return. One recent report suggests that for every dollar spent, the economy receives a return of up to $2.

If we want Minnesota to continue to be a regional and national leader in economic and quality-of-life measures, we need to determine a sustainable, long-term funding solution. We are not sure what that solution might be. But we do know that it will likely be an approach that draws on several revenue sources that would be dedicated to transportation.

For instance, a dime increase in the fuel tax would yield as much as $308 million in revenue annually. And although $308 million is a great deal of money, it will cost the average motorist only about $68 a year.

Photo courtesy of MnDOTWhat can we do with additional funding? In 2008, for example, the state Legislature passed a fuel tax increase that allowed the state to repair or replace 172 bridges, repave many miles of roadway, and replace a number of interchanges.

Innovation and communication Transportation funding in the future will require innovative thinking. And spending will require increased efficiencies.

How we ultimately arrive at a long-term transportation funding source will depend on us all keeping the conversation going between government and the public we serve. So please continue to tell the story so the public understands how transportation is funded, what the long-term needs are, and what the outcome looks like without more revenue.